The U.S. Dollar posted gains against most major currencies on Monday in a continuation of the move which began on last Thursday and accelerated on Friday following a better-than-expected U.S. Non-Farm Payrolls Report.  

This strength may continue overnight but a consolidation pattern could begin as early as tomorrow morning in New York when the Fed begins its two-day Federal Open Market Committee meeting.  

Forex traders are beginning to think that market participants are beginning to shift away from a risk appetite driven scenario to a more traditional fundamental scenario where the currency representing the strongest economy dominates the trade.  In this case, the perception that the U.S. economy will lead the world out of its recession is making the Dollar appear more desirable.

The GBP USD confirmed last week’s technical reversal top with a strong follow-through to the downside.  Not only is the stronger U.S. economy a bearish factor on the British Pound, but last week’s decision by the Bank of England to expand its asset buy-back program is also being viewed as a negative factor.

Trader perceptions that the U.S. economy is stronger than the Euro Zone economy and that the U.S. will pull out of the recession before the Euro Zone helped pressure the EUR USD today.  Technically the Euro saw selling because of the confirmation of last week’s closing price reversal top.  At a minimum, this type of pattern usually triggers an initial break of 2 to 3 days before retracing to test the high.  

The USD JPY gained ground on Monday.  The developing strength in the U.S. economy is making the Dollar more attractive as the Japanese economy continues to struggle to find its footing.  Tomorrow the Bank of Japan will announce its interest rate decision.  It is expected to keep interest rates unchanged.

The U.S. Dollar gained ground versus the Swiss Franc.  Investors were encouraged to buy the Dollar on expectations of a recovery in the U.S. economy will lead to higher, more attractive Treasury yields.

Last week’s closing price reversal bottom in the USD CAD was confirmed by today’s rally.  Last Friday’s better than expected U.S. employment report coupled with Canada’s worse than expected report is attracting fresh buying and short-covering.  

The higher yielding AUD USD and NZD USD finished mixed against the Dollar.  If the U.S. equity markets can top out and develop a down trend then look for a much harder break in these two currencies as traders will begin to demand less risk.  Higher treasury yields or speculation that the Fed may announce an exit strategy will also have a bearish influence on these two Forex pairs.


Contact Us:
Local: 312-896-3930
Toll Free: 800-971-2440

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.